Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Rural house prices rise 35pc faster than in town as wealthy pensioners displace local youngsters

A cottage in Blean, Kent. House prices in the country have risen faster than in cities

House prices have risen 35pc faster in the countryside than in urban areas during the last decade, according to Halifax, turning some villages into dormitory suburbs and pricing local young people out of home ownership.

Wealthy pensioners retiring to the countryside and buyers of holiday homes have propelled the average rural house price to more than £196,300 – or £27,000 more than the equivalent property in town. A decade ago, the gap was £20,000.

A spokesman for Halifax – formerly Britain’s biggest mortgage lender and now part of Lloyds Banking Group – said: “The strength in rural property prices over the past decade has resulted in housing becoming less affordable for buyers on average incomes.

“A third of all property transactions in rural areas are accounted for by first-time buyers, compared with a half in urban areas. The difficulty facing first time buyers in rural areas is most acute in southern England. They account for only 15pc of all transactions in East Dorset, 16pc in Mid Devon and 17pc in South Buckinghamshire.”

But are those statistics credible? Ray Boulger of John Charcol mortgage brokers said: “I don’t believe the first-time buyer figures. Halifax claims that 50pc of all property transactions in 2011 in urban areas are first-time buyers, and that even in rural areas the figure is 32pc.

“Estate agents indicate that first-time buyers are not much more than 20pc of the market in total, and I find it very hard to believe they are 50pc of all property purchases in urban areas.”

Whoever is right, local people priced out of rural home ownership will struggle to find council homes in the countryside. Social housing accounts for just 13pc of rural housing stock compared with almost 20pc in town.

The South West, popular with wealthy pensioners and second home buyers, has eight of the ten most expensive rural areas in the country. West Dorset is the least affordable rural area in Britain – measured by the house price/earnings ratio – with an average house price that is eight times local average earnings before tax.

That is double the long term average price/earnings ratio of four times gross earnings. Ben Thompson, managing director of Legal & General Mortgage Club, said: “It is interesting that in the 10 least affordable rural locations we see the lowest percentage of first time buyer, reflecting upward pressure on prices from demand outweighing supply. In practice this means an individual might grow up in an area they love, only to be forced out when they wish to fly the nest and that must be difficult for those directly affected.”

The former friendly society dubbed these baby boomers “hippies” – or the “home is pension” generation. Will such hopes prove to be pipe dream that ends in disappointment? Or, perhaps unfairly after decades of house price inflation, will it be the baby boomers’ children who suffer a financial hangover?